Burma told China Monday it is prepared to "properly settle" a disagreement over Burma's suspension of work on a Chinese-backed hydro-electric dam.

Chinese state media quoted Burmese Foreign Minister Wunna Maung Lwin as saying that his country hopes to increase cooperation with China on matters of mutual benefit. The minister met with his Chinese counterpart, Yang Jiechi, and Vice President Xi Jinping in Beijing.

China had demanded an explanation and warned of "legal issues" after Burma ordered a suspension of work on the Myitsone Hydropower Project amid harsh criticism from local residents and environmental groups.

China's Xinhua news agency said Xi called for the two countries to settle the matter through friendly consultations.

Lu Qizhou, president of the China Power Investment Corporation, told Xinhua last week that his company has invested a huge sum of money in the Myitsone Hydropower Project and strictly observed all laws and regulations in both countries.

He said Burmese officials urged the company in February to accelerate work on the $3.6 billion project, which will produce power mainly for sale to China. He said villagers have already been resettled from the dam area and that work is under way on road construction, site leveling and excavation for the main spillway.

Western governments and environmental groups have welcomed the decision to halt the project as a sign that the Burmese government is becoming more responsive to the wishes of its own people.

Environmental groups say the dam would do great damage to the Irrawaddy River, with devastating consequences for the country's rice production and its local population.